Explore BrainMass

Explore BrainMass

    Accounting: Break-even quantity and capital strucuturing.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    16.1 Shapland Inc. has fixed operating costs of $500,000 and variable costs of $50 per unit. If it sells the product for $75 per unit, what is the break-even quantity?

    16.2 Counts Accounting has a beta of 1.15. The tax rate is 40% and Counts is financed with 20% debt. What is Counts's unlevered beta?

    16.3 Ethier Enterprise has an unlevered beta of 1.0. Ethier is financed with 50% debt and has a levered beta of 1.6. If the risk-free rate is 5.5% and the market risk premium is 6%, how much is the additional premium that Ethier's shareholders require to be compensated for financial risk?

    16.4 Nichols Corporation's value of operations is equal to $500 million after a recapitalization (the firm had no debt before the recap). It raised $200 million in new debt and used this to buy back stock. Nichols had no short-term investments
    before or after the recap. After the recap, wd _ 0.4. What is S (the value of equity after the recap)?

    © BrainMass Inc. brainmass.com June 4, 2020, 1:14 am ad1c9bdddf
    https://brainmass.com/business/capital-structure-and-firm-value/accounting-break-even-quantity-and-capital-strucuturing-387413

    Solution Summary

    The problem deals with estimating the break-even point and evaluating different capital structures.

    $2.19

    ADVERTISEMENT